Nasdaq 100 index to undergo special rejiggering because a few tech stocks have gotten too big

The rapid rise of some already massive tech stocks this year is forcing the Nasdaq to make unusual adjustments to its popular growth index.

The company announced on July 7 that it would conduct a special rebalancing of the Nasdaq 100 Indexwhich will take effect before the market opens on July 24.

THE Nasdaq 100 The index includes 100 of the largest non-financial companies that trade on the stock exchange and is often considered a proxy for growth stocks. The index has jumped about 37% since the start of the year, well above the S&P500 and the Dow Jones Industrial Average.

The Nasdaq said a special rebalancing can be used to “address index over-concentration by redistributing weightings.” The index is already rebalanced on a quarterly basis.

The special rebalancing will help avoid a situation where issuers with individual weightings greater than 4.5% account for more than 48% of the total index, as reported in Nasdaq’s methodology. This limit is designed so that index funds that track the Nasdaq 100 do not violate regulatory rules governing the diversification of registered investment companies.

The Five Biggest Stocks in the Nasdaq 100 – According to Nasdaq Holdings Invesco QQQ ETFswhich follows the index – seemed to be close to this limit on July 10th.

QQQ holdings show how concentrated the index has become. The three most important positions — Microsoft, Apple And Nvidia – make up more than 30% of the combined fund, as Nvidia’s share price has nearly tripled this year. The top 10 holdings represent a combined weighting of almost 59%.

This is the third special rebalancing on record for the Nasdaq 100. The company said it would announce new weightings on July 14.

“Special rebalancing is part of the Nasdaq-100 methodology and ensures that index funds remain compliant with fund diversification rules. index products and trading at the Nasdaq, said in a statement.

There are several index funds that track the Nasdaq 100, including the QQQ, which has approximately $200 billion in assets under management.